You're Wasting Your Time Analyzing the Wrong Data
You're Wasting Your Time Analyzing the Wrong Data
Many analysts rely only on the internal data they collect versus the external data they can also tap. This approach is wrong and leads to wasted resources. Here’s why.
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Everything about your business success and strategic direction can be found within the data you have available, thanks to the various tools and platforms that collect it for you. Among those data points are both internal and external sources of information that can prove useful to you. However, most businesses rely on the internal data they collect versus the external data they can also tap.
This approach is wrong, and it has many businesses wasting their resources. Here’s why.
Internal Data Makes You Myopic
Internal sources of data come from what a business controls. This includes what you have on your cloud-based platforms and computer systems. You can find it in the form of transactional and point-of-sale data, as well as through business applications like CRM systems and device sensors attached to any type of Internet of Things devices.
Today, companies and executives are focused on mining internal data. They pore over last month’s financials and last year’s results, all of which offer historical information. That’s because the data is typically easy to collect, which is one of the reasons that businesses focus so much on this information without paying attention to optimized analytics. Many businesses also believe this information is more relevant to creating a business or marketing strategy. While there are benefits — like collecting insights about customers and prospects — there are also problems with relying solely on this data.
What’s Wrong With Your Internal Data Focus
To gain a competitive advantage, you need to do more than simply find the answers to customer-related questions that need to be addressed. Most importantly, what your customers do and how they act relates directly to what’s going on within the external data, which is related to economic, government, social, legal, and environmental forces. If you’re not looking at these external forces and what’s going on with them, there’s no way you can truly predict what your customers will do.
By only focusing on your internal data, you’re resorting to a reactive approach rather than being proactive in addressing the issues on the horizon for your audience. Imagine being able to deliver solutions to your audience members and customer base, even before they completely realize they need them — or as a just-in-time solution that beats your competition to the punch.
Internal data can be viewed as being somewhat biased because it only tells part of the story that you need to make strategic decisions. Running a company by looking only at internal information is like driving a car while just looking in the rearview mirror. This approach to data collection neglects all the new information that’s available on the open web.
External Data Is the Right Approach
External data is any information related to the company that is collected outside the company’s confines. This type of information delivers a larger picture of what’s going on, and it’s readily available from many government agencies because of the open initiatives now in place. More tools and platforms are also available that cull and segment external data for a more efficient and comprehensive analysis of consumer, product, and industry trends.
The theoretical approaches of metrics like SWOT analyses still hold true. As a refresher, you list the strengths, weaknesses, opportunities, and threats that you see in relation to your own ability as a business. Along with other systems like PESTLE (political, environmental, social, technological, legal, and economic), which only look at the external environment surrounding your business and industry, you can establish a clear picture of what the future may look like, given the trends that emerge from those factors.
The "Outside Insight" Approach
Every day, your competitors are leaving online breadcrumbs that you can use to gain valuable insights. This external data can help you with everything from hiring a new employee or filing a new patent to launching a new product. The outside information allows company leaders to make more informed decisions about these key strategic moves that will lead to better results. In the meantime, everyone related to your business will benefit, including your board of directors, investors, executives, marketing team, product developers, and customer service personnel.
Embracing the New Digital Reality
Those who embrace this new digital reality will have an information advantage over those who don’t. That means, quite simply, choosing external data over internal data.
This is not to say that internal data should be completely disregarded — it still can, of course, play a valuable role in making some of your decisions. But there’s a real advantage to shifting your focus to external data sources, including trade journals, government statistics sites, industry reports, wholesale distributor insights, and more. Knowing which way the winds are blowing means your strategic direction — and your business’s success — isn’t far behind.
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